NEWSMAKER-New Japan finmin in tough fiscal game

TOKYO | By Leika Kihara

TOKYO Feb 22 New Japanese Finance Minister
Kaoru Yosano, a master of the chess-like game of Go, will need
all his tactical skills if he is to get the world's
second-largest economy out of its deepest recession in more
than a generation.

A veteran politician who favours hiking taxes to repair
Japan's tattered public finances, Yosano is worried that big
fiscal spending will only add to public debt now running at
about 150 percent of gross domestic product, by far the highest
among major developed countries.

Prime Minister Taro Aso picked Yosano as finance minister
last Tuesday to replace Shoichi Nakagawa, who resigned after
being forced to deny he was drunk at a G7 news conference in
Rome last weekend. [ID:nT79787]

Analysts say Yosano's appointment is unlikely to lead to
any major change in economic policy, and his time in the hot
seat may also be limited given the plunging popularity of the
Aso government.

"Yosano has been forming the basic economic policy of the
Aso administration, and his views are seen to be akin to those
of the finance ministry," said Takeshi Minami, chief economist
at Norinchukin Research Institute.

But the 70-year-old fiscal hawk may have a tough time
finding enough hours in the day to juggle his new finance and
banking supervision portfolios with his role as economics
minister.

His connections among government bureaucrats may help him,
but the workload has already kept him from travelling to Phuket
in Thailand to attend the ASEAN+3 finance ministers' meeting on
Sunday.

"It's a huge problem that Japan is unable to send a finance
minister to international meetings at a time like this," said
Koichi Haji, chief economist at NLI Research Institute.

STRIKING A BALANCE

Grandson of two well-known poets, Yosano started his
political career in 1968 by joining the office of Yasuhiro
Nakasone, who was prime minister in the 1980s.

As economics minister, Yosano has tried to strike a balance
between fiscal discipline and the need to support the economy
amid the worst global financial crisis in decades.

Indeed, he has urged restraint from those calling for extra
government spending of up to 30 trillion yen ($322 billion) in
the wake of recent data showing the economy shrank the most in
nearly 35 years in the quarter to Dec. 31. [ID:nT74412]

But he has also become more flexible about spending to get
the economy out of recession, and last year spearheaded the
compilation of a stimulus package now in parliament that
includes 12 trillion yen in spending for the current year.

Yosano has even signalled that the government could come up
with more steps to resuscitate the economy as the fallout from
the global financial crisis widens.

"The situation is changing rapidly, and it's changing due
to factors the Japanese government cannot control," Yosano told
a television programme earlier this month, adding that it would
be wise to examine further spending to support the economy.

Yosano backed the Bank of Japan in 2006 when it wanted to
raise interest rates in the face of a pick-up in inflation, in
contrast to some ruling party lawmakers.

He is thus unlikely to put explicit pressure on the central
bank to ease credit, especially when Japanese interest rates
are near zero and the bank is already adopting a range of steps
to free up cash.

Still, Yosano's time in office may be short. Polls suggest
the opposition Democratic Party of Japan stands a good chance
of winning elections for parliament's lower house that must be
held by October. [ID:nPOLJP]

The prime minister's support ratings have plummeted after a
series of policy gaffes and flip-flops as he struggled to deal
with the recession, and Nakagawa's resignation has only made
things worse.

With the increasingly feisty opposition already in control
of the upper house, Yosano is unlikely to be able to push any
major policy initiatives, some analysts say.
(Editing by Mathew Veedon)